A business can sell its products and services to consumers in one city or local area, one country, or around the world.
In this lesson, you will learn about local, national, and global businesses.
Types of Businesses
Let’s meet Janette. Her Introductory Business teacher just assigned a project where she must explain and find examples of local, national, and global businesses, but she’s not sure she understands the differences between them. Let’s help Janette understand the differences between these types of businesses and look at some examples so that she can finish her project.
Local Business Characteristics
A business can choose to sell its products to customers in its own community, its own country, or on another continent. A local business is one that sells its products and services to consumers in its own city, town, or geographic area.
A one-person barber shop would be an example of a local business, as the barber would only offer his/her services to individuals in that community.A local business benefits from knowing the wants, needs, and culture (i.e. the beliefs and customs) of its community, and it supplies goods and services that the citizens in that community would buy. For example, The Grounds of Alexandria is a caf; that operates in New South Wales (Australia). It offers fresh, local ingredients for the meals it serves.
Since it only has one location, it can focus on the needs and wants of the local community.Since local businesses have few locations, they often find it difficult to compete with larger, global companies, especially when it comes to price. Many local businesses focus on providing exceptional customer service as a way to encourage customers to return.
For example, The Grounds of Alexandria caf; offers a shuttle service to and from its caf; on weekdays.Now that Janette understands what a local business is, she has made a list of those that she is familiar with, including her hairdresser, her doctor, her dentist, and her piano teacher. She had no idea there were so many local businesses in her community.
National Business Characteristics
A national business is one that operates within the borders of a particular country. Like a local business, a national business understands the culture of the country and develops products and services to satisfy its market.
For example, Doughnut Time is a doughnut shop that operates throughout Australia. It has created doughnuts that appeal to its market and includes Nutella and vegan varieties. Since the company began in Australia, its owners know what the market is looking for, and they provide products that will sell well.Since a national business has more locations than a local business, it can be more competitive with its pricing.
This is because it buys its raw materials, or things like flour and sugar that are used to make doughnuts, in greater amounts. The more it buys, the lower the cost will be. Like a local business, a national business understands the wants and needs of its consumers, and it provides products and services that will satisfy customer demand. A national business also has access to a larger market as it is selling its products and services across the country, instead of in just one city.
Janette didn’t think too much about her favorite doughnut shop. She enjoyed doughnuts for her birthday at home and also when she went on holiday. She now knows that they have shops everywhere in the country.
Global Business Characteristics
A global business conducts business around the world and has access to a market that is much larger than that of a local or national business. A larger market means that more consumers will purchase a company’s products and services, which means greater profits for the company and its owners. Examples of global businesses operating in Australia include McDonalds, Kentucky Fried Chicken, and Starbucks. Each of these companies has locations throughout the world.
Since a global business has access to larger markets, it doesn’t have to worry as much about a competitor entering a particular market and taking its sales. Also, it likely has other markets in which to concentrate, so the impact on its overall profits from reduced sales in one area would be less significant.Global businesses also provide consumers with more choices for products and services since they may offer products that consumers cannot buy locally or nationally.Now that Janette knows what global businesses are, she realizes that she buys some of their products and services. She didn’t realize that her purchases from a global business would reduce sales at local or national businesses. She can’t wait to finish her project to show her teacher all that she has learned.
Let’s review what we’ve learned. A business can sell its goods and services to consumers in its own community, its own country, or to consumers all over the world. A local business sells its products and services to consumers in its own city, town, or geographic area. This type of business is usually small, and it may have more than one location in the community. Local businesses know the wants, needs, and culture (or beliefs and customs) of local citizens, so they are able to provide products and services that their customers will purchase.A national business sells its goods and services to customers throughout its country.
It also understands the wants, needs, and culture of its customers. Since it is larger than a local business, it can purchase its raw materials (such as items needed to make its product) less expensively as it buys more of those materials.Lastly, a global business sells its products and services to customers all over the world. It has access to a much larger customer base than a local or national business.